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Scott Said:

What, exactly, do banks do to EARN the interest on a mortgage loan?

We Answered:

I am not a lender. You are paying to use someone elses money. They give you 250k, and you agree to repay it with money to the lender.

This money, the interest collected, is the interest paid to the investors, people with their money in the banks accounts.

But, since we are greedy, the banks actually had to borrow that money from somewhere else and are paying a huge chuck of the interest collected from you to the entity they borrowed from.

If you have a problem with using someone elses money to profit yourself (assuming you invested the 250K) then simply do not do it. Be a cash investor.

It is absurd that you apparently resent paying to spend money that does not belong to you in the first place.

Olga Said:

would the abolition of inter banks lending eradicate the typical financial crisis faced by rich countries?

We Answered:

Inter bank lending has nothing to do with trading mortgages etc. No inter bank lending will mean that the banking system will grind to a halt. Now, restricting trading of mortgages might help but there were banking crises before such trading was invented. It would be better to ensure that the people taking out mortgages could afford them (at least 20% deposit and full income documentation).

Carlos Said:

Question about mortgage lending/underwriting and non-conforming properties?

We Answered:

Because there is a deductible involved. If the property is destroyed it is unlikely that the borrower will be likely to pay the deductible.

In most, if not all property insurance policies the insurance company requires the homeowner to rebuild the premises that is destroyed. If the homeowner doesn't rebuild the insurance company will not pay the full amount of the policy limit, but usually only about 2/3 to 3/4 of the policy limit. This discourages fraud and arson by the policy holder.